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Italy: Supreme Court holds that a settlement agreement will be void if there is fraud on the part of the Company

By decision no. 8260 of 30 March 2017, the Supreme Court has held that a settlement agreement, signed at the Labor Office, will be void if there is fraud on the part of the employer.

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In this particular case, an employee was dismissed as a result of a collective dismissal procedure on the basis that his role was redundant and no longer existed. After the dismissal, the employee signed a settlement agreement before the Labor Office accepting the dismissal. Subsequently, the employee became aware of the fact that the Company had hired a new employee to perform the same activities previously carried out by him.

In light of this, the employee challenged the settlement agreement and the Supreme Court ruled in his favor declaring it void, due to a fraud of the employer, who had led the employee to sign the settlement agreement on the false basis that his role no longer existed.

The Supreme Court said that "malicious silence" by the employer can impact on the willingness of an employee to accept a settlement agreement, and can therefore amount to fraud.

This court case is particularly significant as it means that an employer must not replace a dismissed employee who has been terminated on the basis that their job no longer existed, even if a settlement agreement is executed.

The case has now been returned to the Appeal Court to determine the impact of the Supreme Court's findings on the lawfulness of the employee's dismissal.